Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of Scoop.it! Football Finance

Archive for the ‘2018’ Category

Of (dream) stadiums at Plymouth and Southend

Posted by John Beech on May 29, 2011

While the insolvency process has many shortcomings when it comes to football clubs, one good thing it does do is shake some of the skeletons out of the cupboard.  As a Pompey fan, I’m expecting some pretty shocking data, and, who knows, even legal proceedings, to emerge as forensic accountants work on the liquidation of the old company (1).

At Plymouth Argyle a bit of a shocker has emerged (2) – the sum spent on the ill-considered attempt tp get a new stadium on the back of England’s inglorious 2018 World Cup bid.  If you haven’t already seen it, sit down, because it was an eye-watering figure of up to £1.2m.  It doesn’t take the 20/20 vision of hindsight to see that this was plan that didn’t make sense for Argyle – see my posting Are we going stark stadium bonkers? from April last year.

Argyle fans might spare a thought for the fans of Southend United (see postings passim), where £1.2m had been spent over a year ago on the as yet unstarted Fossetts Farm new stadium, of which club Chairman Ron Martin’s family will be the financial beneficiaries.  A year on and this figure has certainly gone up.  Last February the club requested Southend Council’s Development Control committee to confirm the development of the new stadium as two components (3), which required the preparation of two new detailed plans for the submission.  This request has been approved by the Council (4).  Meanwhile there is the matter of getting shop owners out so that the Roots Hall redevelopment by Sainsburys can be given a clear run (5), doubtless with the lawyers adding to the overall final bill.

The Roots Hall redevelopment by Sainsburys cannot begin until the first part of the Fossetts Farm development is completed.  I just wonder how long Sainsburys will tolerate the delays  as this whole saga of a move to Fossetts Farm has been dragging on for over ten years.  Perhaps I should be more understanding – Pompey have been talking of a new stadium since the 1970s, but then they haven’t pursued the idea as relentlessly, and I suspect at a rather lower cost to the club.  Who knows, perhaps the investigations surrounding the liquidation of the old company may reveal a secound bout of absurd 2018 profligacy on the South coast (6).

Posted in 2018, Insolvency, Stadium | Tagged: , , | 2 Comments »

Lessons from South Africa

Posted by John Beech on January 5, 2011

If you are still ‘feeling the hurt’ of England’s failed bid for the 2018 World Cup (and perhaps thinking London 2012 will be a roaring success), you may well be interested in the results of a survey made by the National Department of Tourism (NDT) and South African Tourism (SAT) on the impact of the 2010 World Cup.  Apparently it  shows that “without a doubt that the event will have a lasting legacy in terms of the South African tourism industry” (1).

Now this doesn’t exactly come as a surprise.  It has long been established by Adam Blake, Professor of Economics & Econometrics at Bournemouth University’s School of Tourism, and others, that the Olympics, for example, can have a positive economic effect.  The impact varies though – generally it is fairly local, and, in terms of an ongoing tourism legacy, the less the destination is already an established tourism destination, the bigger the subsequent impact.

Undoubtedly there are some great headline statistics for South Africa.  See futebolfinance for a quick summary.  But as futebolfinance points out, “With a cost that was estimated at about 3,225 million Euros (see How much is a FIFA World Cup ), the benefits are clearly below costs, leaving just as big beneficiaries of the events, FIFA itself and the sponsoring companies that achieve a huge media exposure.”  South Africa’s Minister of Tourism Marthinus van Schalkwyk insists that “I have no doubt that South Africa is reaping the rewards of hosting the Cup.”  Well, he wouldn’t, would he?

All of this just reinforces my personal view that FIFA (and the IOC) have done an amazing PR job in managing to get countries queuing up to lose money while others reap the benefit.  In the case of FIFA, where Seb Blatter has made much of his desire to take the World Cup beyond its traditional host areas, it is abundantly clear that the number of possible new venues is going to be extremely limited.  Beyond Qatar, the ability to finance the hosting of a FIFA World Cup may be restricted to countries like Saudi Arabia and the United Arab Emirates.  Is that really Blatter’s intention?  There is an obvious way of facilitating a wider range of hosts – cash-rich FIFA could subsidise the hosting.  Not that I’m holding my breath mind you…

Posted in 2010, 2012, 2018, FIFA | Tagged: , , , | 7 Comments »

Lessons from Plymouth

Posted by John Beech on January 3, 2011

The car crash that Plymouth Argyle is on the verge of turning into is a strange case, yet many a club might well think that there but for the grace of god go they.

At the beginning of the nineties Dan McCauley had become Chairman, with his predecessor Peter Bloom becoming Vice Chairman.  While the club did not have a particularly stable decade on the pitch (three relegations in eight years; seven managers), the club was run reasonably stably, if unsustainably, on a traditional benefactor model.  Shortly before McCauley finally stood down in 2001, debts were reported to be £2.7m, with £1.8m owed to McCauley’s Rotolok Holdings.  He was also advocating a new stadium, the capacity of which was wound in from 23,000 to 18,000, but with scope to increase capacity.  As McCauley explained “An 18,000 all-seater stadium should be sufficient for us in the short-term. But it’s important to have flexibility in the design to cater for success when Plymouth Argyle move up through the leagues.”  ‘Sufficient’ is an odd choice of word – average seasonal attendances throughout the decade had peaked at just over 9,000 in 1994, but had fallen to around the 5,300 mark.  The sort of figure McCauley was speaking of had not been seen at Home Park on a regular basis since the fifties (1).

Reaching the age of 65 in 2001, McCauley found buyers he felt would be good for the club.  The new board was led by local businessmen Paul Stapleton and Peter Jones, and included the local MP Michael Foot, and two London-based businessmen, Nick Warren and Phil Gill, all Pilgrim fans.

[Sources for the above paragraphs are newspapers, mainly the Western Daily Herald, and are unavailable on the internet]

Under the new regime, stadium redevelopment proceeded, but hit a snag when the Council declined to carry on funding it (2).  Having already spent £2.6m, it felt that it was difficult to justify further expenditure.  Argyle Vice Chairman Peter Jones rather ungraciously argued “People should not forget the council are the freeholder of the stadium. Given the fact that a revamped stadium will bring in more people, more income and more rent, they should be prepared to put in a proportion of the £5m we need.

From a business perspective the early years of the noughties were a success.  In 2004 they announced a profit for the third year running (3), and by 2005 the seasonal average attendance had reached almost 16,500, following a return to Tier 2 for the first time since 1992.  The ground was purchased from the Council in December for £2.7m (4).

How then did things start to go wrong?  The management of players proved problematic. with continuing changes in who was manager.  The club managed to maintain their status in the Championship (until last summer, that is), but the fans started to drift away, attendances falling to just over the 10,000 mark on average.

In February 2008 the club recorded a record annual loss of £715,000 (5).  Not only were revenues down, but the club had locked itself into some rather expensive player contracts.  The wages/revenues ratio, which in 2001/02 had been at a very healthy 43.1%, had by 2007/08 risen to a rather unhealthy 74.4%.

In April 2008 the club announced a surprise new investor – Japan’s K&K Shonan Management Corporation, headed by Yasuaki Kagami who joined the Argyle board (6).

Argyle chairman Paul Stapleton, said: “We are excited about the future possible revenue streams from the Far East in particular and expanding the horizons of Plymouth Argyle. While this agreement has only just been concluded, it demonstrates the considerable appeal that Plymouth Argyle and our region has for companies with a global reach.”  I suspect that few outside Plymouth shared this optimism.

Japanese involvement increased when Yasuhiko Okudera was appointed Argyle’s President (7), and there was talk of Japanese players coming to Home Park (8).

By the summer of 2008 things were beginning to crumble; the transfer budget was reported as overspent (9).  By March 2009 non-playing jobs were at risk (10).

By the summer of that year there was talk of not only further investment from Japan but also of a takeover (11). Phill Gill sold his shares to Kagami (12), and by July Kagami held 38% of the shares, and his colleagues Sir Roy Gardner and Keith Todd joined the board with holdings of 13%, the trio thus holding a small majority.  The appearance of Gardner in particular, a former Chairman of Manchester United, raised hopes for some stabilisation.  Paul Stapleton said of Gardner “He’s going to bring a no-nonsense, common sense approach, and a business attitude to everything we do” (13).  The challenge was certainly there though – they had, for example, inherited a squad of over 30 players (14).

There was to be no magic wand.  In December that year the club was placed under a transfer embargo (15) for what the club dismissed as historic debts, and Kagami rode to the rescue with a loan [sic] of £1.5m (16).  Kagami was meantime being sued for £84,000 by former director Gill (17).

2010 opened badly, with the first of a series of winding-up petitions from HMRC (18).  In March there was the announcement that the club was to ‘sell off the family silverware’, the only recently acquired Home Park (19).  A ‘New World’ was heralded nevertheless (20), involving a 46,000 2018 World Cup stadium – rather than repeat my thoughts on this, see a posting I made at the time called Are we going stark stadium bonkers?.  The year’s financial figures, which featured a loss of £2.9m, were described by Gardner, with the kind of understatement that football club Chairmen specialise in, as ‘disappointing‘ (21).

The relegation to League 1 was a bitter pill to swallow given the already worrying state of finances.  Gardner however insisted that the new stadium was the way forward: “A new stadium is an essential part of our forward-planning and reflects the scale of ambition at the club” (22).  Oh dear, the A-word (ambition).  Perhaps the R-word (reality) might have been more appropriate.

The scale of ambition was certainly enormous – last August the board announced plans for a £150m redevelopment of Home Park (23)!  The following day, it emerged that the club had not paid their long-serving announcer since late in the previous season (24).

Things have just progressed from bad to worse since then, and I will assume that any reader who reached this point is already familiar with the failed 2018 bid, the further winding-up petitions from HMRC, and the worrying appearance of Peter Ridsdale.  I will spare you a repetition of his experiences at Leeds United and at Cardiff City (but see here if you want to read my previous postings on the Spinmeister).  Less well remembered are his days at Barnsley – he took over in October 2003 (25); when he left fourteen months later, new Chairman Gordon Stewart explained Ridsdale’s departure “The club was running into a financial position that was less than comfortable and it was clear cash had to be injected” (26).

For the Spinmeister himself to declare the situation at Plymouth as ‘dire and I can’t even find the words to put into context how bad it is. It is probably worse than you can imagine. This is a race against time‘ (27), one can only assume the situation is considerably worse than dire.

With the exception of bringing in Ridsdale as a ‘saviour’ – all I can offer as hope to the Green Army here is the thought that this might just be a case of fourth time lucky, although I don’t think it actually will be ;-(  – the situation at Argyle is one that could have happened at too many clubs – ‘benefactors’ who couldn’t or wouldn’t stay the course, overpaid players, cashflow insufficient to pay all staff on time, a high turnover of managers, a serious case of ‘stadium envy’, a casual attitude to paying HMRC, absentee investors, an absence of fan power…  It encapsulates most of what is wrong with English football, and offers a very depressing start to 2011.

Posted in 2018, Assets, Benefactors, Cashflow, Debts, History, HMRC, Insolvency, Investors, Ownership, Stadium | Tagged: , , , , , , , , , | 14 Comments »

Run that past me again?!?

Posted by John Beech on December 3, 2010

As someone whose heart wanted England to get the 2018 World Cup, but whose head didn’t (in a nutshell, and amongst a number of reasons, we can’t afford it) I naturally had mixed feelings about our failure to win today.  ‘Failure to win’ is of course a massive understatement.  We presumably only attracted one vote from the other 21 FIFA Exco members.

FIFA, not known for its transparency, provides few metrics in its evaluation reports (available here).  They do however give a range of ratings related to risk.  Perhaps we had submitted a bid that was too risky.  Well, have a look for yourself:

ENGLAND NETHERLANDS / BELGIUM SPAIN / PORTUGAL RUSSIA QATAR
LEGAL EVALUATION
Government documents
Government guarantees Low risk Medium risk Low risk Low risk Low risk
Contractual documents
Hosting agreement Low risk Low risk Low risk Low risk Low risk
Host city arrangements Low risk Medium risk Low risk Low risk Low risk
Stadium agreements Low risk Medium risk Low risk Low risk Low risk
Training city agreements Low risk Medium risk Low risk Low risk Medium risk
Confirmation agreements Low risk Low risk Low risk Low risk Low risk
Overall
Overall legal risks Low risk Medium risk Low risk Low risk Low risk
OPERATIONAL RISK
Competition
Stadium construction Low risk Low risk Low risk Medium risk Medium risk
Stadium operations Medium risk Medium risk Medium risk Medium risk Medium risk
Team facilities Low risk Low risk Medium risk Low risk High risk
Competition-related events Low risk Low risk Low risk Low risk Low risk
Transport
Airports and international connections Low risk Low risk Low risk High risk risk Medium risk
Ground transport Low risk Low risk Low risk Medium risk Medium risk
Host city transport Low risk Low risk Low risk Low risk Medium risk
Accommodation
General accommodation Medium risk Medium risk Low risk Medium risk Medium risk
TV
International Broadcast Centre Low risk Low risk Low risk Low risk Medium risk
NO. OF VOTES
Round 1 2 4 7 9 11
Round 2 2 7 13 10
Round 3 11
Round 4 14

The rating of ‘High risk’ occurs only three times in all the ratings for 2018 and 2022 contenders – twice for Qatar and once for Russia.

It would seem that, far from being risk averse, the FIFA Exco members favoured risky bids!

Of course, I’m falling into that old trap of assuming that they behaved and voted in a rational way.

So, if it wasn’t content that wooed them, perhaps it might have been style.  No metrics here, but my impression was that we had come to the party with just the right blend of banalities and photogenic children that had worked so well in Singapore.  Certainly our effort was no more nor less vomit-inducing than the oppositions’.  Certainly it was no less contrived.

Inevitably we come back to the process of selection as the root cause of England’s failure.  We didn’t jump through the right hoops.  We didn’t pound the ground or press the flesh hard enough.  We trusted Jack Warner.  We were naïve.  The core question is which of those are things we should not be happy with.

As we wake up the next morning, sadly free of the anticipated hangover, criticism continues to focus on the role of our media.  It was Panorama and The Sunday Times wot dunnit.  Whether it was or wasn’t will be endlessly debated, but that misses the point.  Having a free press with a healthy body of investigative journalists who are happy to point out that the emperor has no clothes is something we should celebrate rather than lament surely, even if we don’t like the outcomes.  There is a need to distinguish between the process of selection and the outcomes of that process.

As for the outcomes, there could have been (from all the countries in the world) far worse choices than Russia.  Have a look at this clip of their plans for stadiums.  Mind you, it would hard to find a less appropriate choice than Qatar to be the host of football’s crowning glory.  I’m sure many a fellow academic is already planning their research on the socio-cultural impact of 2022 on Qatar.  I suspect that either fans will stay way (I would recommend Amnesty Internationals’ latest report on Qatar before you book your flights) or Qatar will unleash a lot of unwelcome behaviour in its hotels, which will test their public relations arm to the limits.

As for the media, there are in fact examples of both excellent and diabolical commentary.  Topping my list of excellent commentary at the moment is Declan Hill’s Stumped, Unanswered Questions and an Organization with a Credibility Death-Wish, closely followed by David Conn’s contribution, Jens Sejer Andersen’s contribution, Paul Kelso’s contribution and Ian King’s reflections over at TwoHundredPerCent. Dishonorable mentions must go to the Daily Mail, and to an amazing attack on the ‘eight villains of the piece‘ by the Guardian, although the last of these appears to have been removed from their website.

If there is any criticism to be made of our media, it is that they raised our expectations too high.  The strength of our bid technically may well have encouraged them to do so, but they didn’t seem to have noticed that the decision is made not by a committee of wise and rational men, but rather by a group of malleable football D-listers.  The evidence was there, thanks to journalists like Andrew Jennings, but was perhaps not given the prominence in mainstream media over the years that it deserved.

Posted in 2018, Journalism, Marketing, Media, Public relations | Tagged: , , , , | 8 Comments »

HMRC v. Sheffield Wednesday

Posted by John Beech on July 24, 2010

Sheffield Wednesday are the latest club to face a winding-up petition from HMRC (1), over a PAYE debt of £550,000.

But Sheffield Wednesday is not your average club.  A founder member of the Premier League, its playing performance has been somewhat variable since.  Relegated in 2000, it faced a further drop to League 1 in 2003, bounced back to the Championship in 2005, only to be relegated again this summer.

In spite of this yoying, which makes financial control a particular change, the club had managed to turn a profit before tax in 2006/07 of £1.5m and in 2007/08 of £2.2m, although worryingly the most recent figures, for 2008/09, show a loss of £3.7m.  Also worrying for the club is that the all important salaries/wages ratio, which for four consecutive seasons had been below the ‘good practice’ mark of 60%, leapt up to 73% on 2008/09.

In the annual report for 2008/09 Chairman Lee Strafford said “…Sheffield Wednesday is a good long-term opportunity for investors who are focused upon developing the strategy that has now been put in place.  There are a number of possible investors looking at the plans and assessing the potential, but your board has drawn up these plans with a view that the continuing support of the Co-operative Bank and the other debt holders the club can be taken forward with or without investment.  This is a credit to the longer-serving and former directors who have ensured that the club continued to remain within its agreed banking facilities, which have been renewed until 31 December 2010.  The Group’s net debt has been reduced by a further £0.3m during the year from cash generated from operating activities and player trading in the prior year.”  This might be decoded as “We want out.  We are beholden to the goodwill of our bank.

And that goodwill is being stretched.  The most recent data I have indicates that the club’s debt to the Co-operative Bank is just over £24m, consisting of an overdraft of over £9m, a loan for the training ground of over £9m, and parked debt of over £5m.  I read reports on fans’ forums that the club’s overall debt is over £30m.  For a club dropping to League 1 this is a very high level.  My research shows that clubs in League 1 generally begin to get into trouble when debt levels reach £1m, and even for those in the Championship the corresponding level is £3m.

If the club fails to pay HMRC before 11 August, the date the winding-up petition is due to be heard, and it is far from clear at this stage that they will manage to, the prospect of Voluntary Administration hoves into view, with the prospect of new owners looking for a bargain price.  Prospective owners there have certainly been of late, the most recent being a long-running and ultimately unsuccessful attempt by Geoff Sheard and a ‘London-based international consortium’ (2).

Key in negotiations is the 10% holding of Wednesdayite, the Sheffield Wednesday Supporters Society (see here), which is good news from the fans’ perspective.  However, if the club were in Administration, this hardly puts them in a position of strength.

The implications of failing to beat, ironically enough, Crystal Palace on the last day of the season, thus being relegated, may prove far-reaching.

One thing I have not mentioned so far is that last October the club won approval for an expansion of Hillsborough from 39,000 to 45,000 seats, due for completion by the end of 2013 and at cost of, wait for it, £22m.  For the record, the average attendance last season when still in the Championship, was just above 23,000.  Comment is superfluous.

Posted in 2018, Debts, HMRC, Pyramid movement, Stadium, Trusts | Tagged: , , , , , | 2 Comments »

A Political Football

Posted by John Beech on May 20, 2010

In the lead up to the general election (and running alongside a large number of local council elections), I blogged on how I thought it significant that the political parties were wooing the fan vote, but did not hold out much prospect for major new initiatives actually happening after polling day.  Well, as many a commentator has pointed out, the public have now spoken, although it’s not entirely clear exactly what they were saying.

Cameron has already come in strong support of the 2018 World Cup bid, indicating that he is happy to comply with whatever is necessary, by implication including the waiving of tax bills (see FIFA’s muscle flexing).  Apparently singing from a different hymn sheet, the new Conservative Minister for Sport, Hugh Robertson, has indicated in no uncertain terms to the football authorities that “they must reform their governance and power structures or face the prospect of external regulation” (1) – something which would not exactly be looked kindly on by FIFA, who tend to suspend national football authorities that suffer from governmental interference.  We shall see.

On the opposition benches, we now have an increasing number of runners for the post of leader of the Labour Party, the most interesting one of which, from a football perspective, is Andy Burnham, former Culture Secretary.

All then is far from clear with respect to future political strategy and the beautiful game/ugly business.  I thought it would be interesting nonetheless to look at how the political representation has changed in the light of the election results, that is, with respect to the changes in constituency representation of clubs.  So far I have only looked at Premier League clubs, but plan to extend this to at least the Championship as time permits.

It would be easy to make far too much of who the local MP is for clubs from a fans perspective.  Clubs draw fans from a much wider area than just the constituency in which their stadium sits.  How many declared Manchester United fans, for example, could tell you that Old Trafford is in the Stretford and Urmston constituency?  How many have even heard of Urmston for that matter?

The local MP is however the natural point of contact for a club to raise its political concerns with, especially if there really is going to be imposed reform.  With regard to Premier League clubs, this comprises a grand total of not twenty MPs, but in fact eighteen.  The stadiums of Aston Villa and Birmingham City are both in the Birmingham Ladywood constituency, and Chelsea and Fulham both find themselves in the appropriately named Chelsea and Fulham constituency.  An interesting thought is that Greg Hands, MP for Chelsea and Fulham, could in theory find Abramovich and Fayed sitting in his surgery waiting to rant on!

A first looks shows the following:

  • Of the 18, 14 are LAB, 2 CON and 2 LibDem.  However, as of June 3rd, when relegations officially take place, both LibDems disappear from the list (they are the MPs for Burnley and Portsmouth) to be replaced by LAB MPs (whatever the outcome of the Play-Off Final).  The two CON MPs are the said Greg Hands, and Paul Uppal, who represents Wolverhampton South West, a CON gain from LAB.
  • In only four constituencies did the swing exceed the average swing in England (5.6% from LAB to CON) – Bolton West, Chelsea & Fulham, Stoke-on-Trent South, and Wigan.  7 swung to CON, 4 to LibDem, and 7 to LA, the most marked case being a 7.7% swing from CON to LAB in East Ham (home of West Ham United).  Other anomolies were swings from LAB to LibDem in Hull West & Hessle (7.9%), where Alan Johnson is still the MP, and Burnley (9.6%).

The overall picture is a tad messy, but in general these Premier League constituencies are now in opposition hands, as they normally have been, largely because the LAB vote held up better than elsewhere in England.

Of more direct relevance to the day-to-day running of clubs, and their planning applications, are local councils. Yesterday alone, for example, I found two news stories involving Premier League clubs and their respective local councils (in both cases, examples of conflict).  Tottenham Hotspur have had to revise their planning application to Haringey Council for their ground development because it has originally proposed the demolition of four Grade II listed buildings (2).  At Stoke, “Furious councillors have slammed a Government watchdog after a long-awaited audit report [on the Britannia stadium] was hit by yet more delays” (3).

In spite of covering numbers of voters than parliamentary constituencies, we are left with eighteen different councils (and exactly the same duplication as with constituencies).  Initial findings are:

  • LAB control eight councils, LibDem 3 (but these are the relegated Burnley, Hull and Portsmouth), CON 2, and 5 with No Overall Control (NOC).  The ‘new boys’ for next season are Newcastle (LibDem) and West Bromwich (LAB), plus either Blackpool (CON) or Cardiff (a coalition of Plaid Cymru and Independents).
  • LAB made three gains, two from LibDem and one from .  Neither CON nor LibDem made a single gain.

As I said above, it is easy to make too much of all of this.  What is clear though is the Premier League clubs find themselves represented in parliament mainly by Labour, now in opposition, and similarly Labour at council level, more typically in control.  This is as it has been historically, except of course that Labour are now in parliamentary opposition.  Generally this would be interpreted as bad news for the Premier League clubs, but perhaps the ‘new politics’ of coalition will see the Conservatives and the Liberal Democrats maintain their apparent impetus to woo the ‘football’ vote.

If they really are to survive a fixed five-year period in power, they will at the very least have to take more considered positions than the two knee-jerk responses I referred to above by Cameron and Robertson.  They will also have to think carefully where they stand as the UEFA Financial Fair Play Protocol comes inevitably into operation.  Will they take a ‘free-marketeer’ approach, placating the Premier League oligarchs and antagonising UEFA, or will they support a growth in fan ownership, an increase in their support of Supporters Direct being an obvious way to show this?

Posted in 2018, Governance, Politics, Premier League | Tagged: , , , | Leave a Comment »

FIFA’s muscle flexing

Posted by John Beech on May 13, 2010

Given that both tax and transparency are very much flavours of the month in football, it’s surprising that an item on England’s bid for the 2018 World Cup should have provoked so little reaction (1).  In a nutshell, FIFA are demanding that the World Cup should be tax exempt in any hosting country:

“Any host country requires a comprehensive tax exemption to be given to Fifa and further parties involved in the hosting and staging of an event,” said a Fifa spokesman.

Apart from the obvious need for this posting to gain a ‘Chutzpah’ tag, one must wonder why FIFA, a registered charity, should see the need to gain exemptions for ‘further parties’, i.e. players.

No doubt FIFA would argue that a) they need to get the best deal they can and b) in some potential host countries (Qatar seems the most obvious example) the personal income tax rates are considerably lower than in England.

True, but it strikes me that FIFA are really rather getting above themselves in dictating tax arrangements in foreign countries.  They bemoan governmental interference in football, as they have recently made clear by threatening to suspend El Salvador (2), yet apparently feel it perfectly acceptable to interfere with the running of sovereign states.

As if this in itself is not shocking enough, FIFA also insist that such interference remain confidential!

Do they involve relieving the players, possibly even those already resident in the UK, from paying tax on their incomes?

“I’m not able to tell you,” said a spokesman for the England 2018 bid team. “Fifa requires it [the technical bid document] to remain confidential.”

But he stressed that this applied to all conditions, including those applying to visas, work permits, travel, security, banking and foreign currency, commercial rights and broadcasting.

“It is not a selective confidentiality,” he said.

A spokesman for the Department of Culture, Media and Sport (DCMS) said: “I can’t go into detail of any of that because Fifa have very strict confidentiality clauses – but there is always room for manoeuvre.”

It will be interesting to see how our new government addresses this issue as it begins to tackle the budget deficit.  Time for change I would have thought. ;-)

The practical problem in all of this is that, if the UK and other governments with conventional income tax regimes dig their heels in, FIFA may choose just to place the World Cup in oil rich nations in air-conditioned stadiums (see More stadium madness), which would be another step down the road of the Harlem Globetrotterisation of football.

[For an interesting personal view of the way FIFA operates, those who haven't seen it may find Andrew Jennings' Transparency in Football website of interest (now added to my LINKS page.]

UPDATE – 14 May 2010

Cameron has phoned Blatter and said the new government will do “everything in our power” to help the England 2018 bid (A), presumably including facilitating tax avoidance.  HMRC will be pleased.

Posted in 2018, Chutzpah, Ethics, FIFA, Governance, HMRC | Tagged: , , , , , | 1 Comment »

Are we going stark stadium bonkers?

Posted by John Beech on April 2, 2010

How often have clubs fallen into the ‘cargo cult’ trap of believing that a new stadium with a greater capacity is the answer to their financial problems, only to find that it has increased their financial problems and has somehow failed to deliver as ‘fan bait’?  Think Darlington as the most obvious example.  Think Coventry (where I’m sitting bashing away at the keyboard) or St Johnstone (where Rangers were thrashed 4-1 last week in front of 6,000 in a 10,000 capacity stadium, the first new football stadium in Britain since the old Wembley – I lived in Perth for 20 years, which is why the club is on my radar screen).  Incidentally, for another classic example from Scotland have a quick look here.

To ask a related question, how often have clubs lumbered themselves with unsustainable debt by chasing the dream of a new stadium?  Think Cardiff City or Forest Green as recent examples.

Or to put it a third way, how often have clubs spent and spent on a dream before a sod is even turned?  Think Southend, which has been in court for two consecutive years over debts of £600,000 to HMRC, and has spent £1.2m (now there’s a spooky coincidence) on the as yet unstarted new Fossetts Farm stadium (see postings passim).

How often too have clubs faced spells in exile because selling off the old stadium happened way ahead of the new stadium being started, let alone finished?  Think Brighton as a classic example.

Or have let their stadium slip out of their hands in the belief that sell-and-lease-back made sense, only to find what was intended as a short-term expediency turned sour?  Think Leeds, think Rotherham.

Are you catching my drift here?  Embarking on a new stadium is a very high risk strategy, and clubs seem blinded to the fact that they, their gates, and their revenues may, like investments, go down as well as up.  Unless building a new stadium has a direct bearing on on-the-pitch performance, both outcomes are in fact equally likely.

Add to the heady dream of a new stadium that will somehow take you to the Champions League – well, you have to have ambition don’t you – the prospect of World Cup football in 2018 seems to be taking some clubs into even more irrational plans.  Now, it’s worth pointing out that England hasn’t actually won the bid yet, and, for all the perceived belief that it’s ours for the taking, it should be remembered that we are not alone in bidding.  Call me a curmudgeonly old killjoy for pointing it out, but there are actually six opposing bids, from Australia, Belgium/Netherlands, Japan, Russia, Spain/Portugal and the USA.

If we were to host the 2018 World Cup (and please note my use of the subjunctive; I believe we stand a better than average chance, but with six competitors it is hardly a foregone conclusion that we will), then of course we would want to deliver with the best and biggest stadiums possible.  (Don’t start me off on Scottish question – why a bid that did not include the only city in the world with three 50,000+ seater stadiums was not considered I’ll never know).  But should that mean building new stadiums that just don’t make sense in the longer term, stadiums that run a high risk of ending up as Darlington-style white elephants, with parts closed off as they are too expensive to even maintain?

Imagine you are a club in the Championship.  In 2005 you managed to buy out the lease of your stadium, which has a capacity of almost 21,000, from the local council at a cost of £2.7m.  In 2007/08 you managed to make a pre-tax profit of £1.4m, but in recent years you have more typically made a profit or a loss of less than £1m.  Your wages/turnover ratio has however crept up to almost 75% (1 but resist looking to see which club I am referring to just for the moment).  Gates peaked at an average of 16,500 in 2004/05, but have declined since, this season averaging at just below 10,500, in other words, your stadium is typically half empty.  You are currently sitting in the relegation zone.  You faced an HMRC winding-up order earlier this season and have recently been under a transfer embargo, all of which led you to borrow £1.5m from a company owned by foreign board members in order to ‘stabilise’ the club.  Last Friday the Chairman of the club said “Off the pitch, our wage bill for 2009 was the highest in our history as we increased our player squad and brought in loan signings. Coupled with a further fall in average match attendance, this generated a disappointing financial performance – a £2.9million loss. Included in the loss is a write-off of over £600,000 of costs associated with the previously proposed stadium redevelopment as we reviewed our plans and made the decision to start the redevelopment afresh.” What strategy would you now pursue in redeveloping the stadium you have only recently purchased?

If you haven’t guessed which club I am referring to it might come as a shock to learn the actual strategy which the particular club has chosen to pursue is, on the strength of England’s as yet uncertain 2018 World Cup bid, to plan a 44,000 seater stadium (2)!  To back themselves into a corner, the club, or specifically the shareholders, has just voted to “sell Home Park to a newly formed property company for £7.5 million …  It means the football team will become a ‘priority’ tenant of the new company, a wholly owned subsidiary of Argyle’s holding company, and pay it a ‘market rent’” (3).  Yes, it is Plymouth that I am writing about.  This newspaper report also quotes a figure of 46,000 for the capacity of the proposed stadium.

So, the good stakeholders of the club have voted to move from owning their stadium to paying a market rent on a stadium that would currently by 75% empty.  I despair.

Not that this 2018 madness is confined to Plymouth.  Bristol City (average attendance this season 14,500; capacity of Ashton Gate 21,500) are planning a new stadium with seats for 44,000 at a cost of £92m.  No doubt this has caused ructions across the city, with Rovers (average attendance this season 7,000; capacity of the Memorial Stadium 12,000) pressing on with a £35m redevelopment plan (4) which will increase capacity to 18,000.  That’s an increase in capacity at the two clubs of almost 30,000, clubs which are currently averaging 12,000 empty places between them, at a cost £127m – that’s over £4000 per extra empty place.

As I said in the title of the posting, bonkers.  It’s not as if there aren’t warning signs elsewhere – from yesterday’s press: “Ukrainian President Viktor Yanukovych on Thursday said his cash-strapped country must by January spend at least 3.8 billion dollars on preparations to host its share of the Euro 2012 football championship“. (5)

Posted in 2018, Debts, Stadium | Tagged: , , | 10 Comments »

 
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